Tabcorp is a step closer to separating its businesses after a court in New South Wales approved a shareholder vote on the matter earlier this week. Now, the gaming operator is laying its plans for how things may look once the demerger takes place.
A couple of days ago, the New South Wales (NSW) Supreme Court signed off on a request to allow Tabcorp shareholders to vote on the gaming operator’s demerger of its lottery and keno activity. The company first announced its plans last July, which potentially included the sale of its wagering business, arguing that it would create more value for shareholders.
With the approval in place, Tabcorp can now move on to the next phase. It’s going to retain its wagering operations, but is preparing for the upcoming shareholder vote. This means presenting all the details in such a way that the company will be able to find support for its plans.
Tabcorp Asset Separation on the Table
Tabcorp previously received a lot of attention for its proposed demerger. Entain, Betmakers, and Apollo Global all submitted multibillion-dollar bids. However, when the company decided to hold onto its wagering operations, interest waned.
The lottery and keno activity can still provide a significant source of income for the right suitor. To demonstrate this, Tabcorp is laying out its plans ahead of a shareholder vote on May 12.
There will be two new companies as a result of the demerger. The first is The Lottery Corporation (TLC), and the second is the New Tabcorp.
TLC To Drive Innovation
TLC will continue to offer different gambling options, except for gaming services. This company will essentially follow in the footsteps of Tatts, which Tabcorp acquired in 2017.
It will “generate attractive returns for shareholders,” according to Tabcorp Chairman Steven Gregg. He adds that it has demonstrated its ability to serve the market through product innovation and game portfolio management.
This branch will target operations through five primary strategies – innovation, enhanced UX initiatives, increased penetration, retail growth, and new acquisitions.
Tabcorp’s recent AU$5.00 (US$3.75) share price and standard industry EBITDA (earnings before interest, taxes, depreciation and amortization) multiples give TLC a lot of potential. Advisory firm Grant Samuel recently asserted that its value could fall between AU$11 billion and AU$11.61 billion (US$8.24 billion and $8.7 billion).
New Tabcorp to Focus on Sustainability
The other company will be New Tabcorp. This one may not ultimately be as valuable as TLC; however, it will take the lead in gaming growth.
The Board anticipates that New Tabcorp will also be well-positioned to deliver a compelling customer experience via its omnichannel model, simplify and streamline [gaming services division] MAX, as well as gain future potential upside from any future industry change in the Australian wagering and gaming industry,” states Tabcorp Chairman Steven Gregg.
New Tabcorp will target UX, innovation, efficiency and sustainability. Company leaders expect to be able to greatly capitalize on any gaming reforms that arrive in Australia.
Grant Samuel forecasts New Tabcorp’s valuation at between AU$2.10 billion and AU$2.71 billion (US$1.57 billion and $2.03 billion).
Should shareholders approve the demerger, it won’t take long for Tabcorp to finalize the split. It still believes it can have everything in place by June of this year.